Disinflation With Imperfect Credibility

Preprint
Publisher Website
Google Scholar
    • preprint
      • Published in RePEc
Abstract
This paper presents a theory of the real effects of disinflation. As in New Keynesian models, price adjustment is staggered across firms, As in New Classical models, credibility is imperfect: the monetary authority may not complete a promised disinflation. The combination of imperfect credibility and staggering yields more plausible results than either of these assumptions alone. In particular, an announced disinflation reduces expected output if credibility is sufficiently low.
All Related Versions

This publication has 0 references indexed in Scilit: